Analyst Note| Kevin Brown |
Fundamentals across the hotel industry rapidly declined at the outbreak of the coronavirus pandemic, as many travel plans were canceled. The hotel REITs saw portfolio EBITDA go negative in 2020, leading to share prices quickly falling. After development of a vaccine in November 2020, leisure travel began to return to prepandemic levels, with the economy and midscale hotel segments returning to 2019 levels by the summer of 2021. However, business travel still remains low, as there is little reason for office workers to travel while many businesses are keeping employees home. Additionally, large organizations need to plan conventions months to years in advance, so the pandemic is creating a high level of short-term uncertainty about the safety of gathering indoors and delaying the return of group bookings. With the hotel REITs owning mostly upper-upscale hotels, which have a high exposure to business and group travel, the hotel REITs have reported revenue per available room growth below the U.S. hotel industry average.